covered. >> that's good news for which area >> equities. i think the role of commerce is changing commerce is changing i think it's important for the eco system. >> it's a pleasure having you here that does it for us. make sure you join us on monday. have a great weekend "squawk on the street" begins now. >> good friday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber the dow may avoid the first nine-day losing streak in 40 years. trade worries hit u.s. and asian stocks this week we'll get a russell rebalancing. europe is higher this morning. so is oil as opec agrees on a production hike lower than some

anticipating stock futures pointing to a positive open. dow looks to avoid the longest losing streak since 1978 crude oil is rising. opec boosts a deal and chipotle's new menu the dow looks to avoid the first nine day streak on the downside since '78 s&p and nasdaq on pace to snap a four-week win streak and the damage, jim, asian stocks have lost $2 trillion in market cap over two weeks. so pain has been shared around the globe. >> oh, yeah. and there are stories about margin issues in china and borrowing stocks what is going to happen there. i think that this decline in the industrials in our country it just -- i think one of the

things that is happening take a look at this. their stock went from 82 to 108 overnight. it's like we discovered that the u.s. isn't that bad. the trade has been going on since the fourth week of january. against it, the internationals have just been going down, down, down to suddenly wake up and say, wow these big industrials are down it's a little late i like the groove. if only because i think that the m mnuchin factor okay the people at the white house who were against trade issues. >> no, no. who are against the trade war. >> yeah. i think they lost. >> yeah. >> i know there's a story today. >> yeah. >> a bit of a reproachable another attempt to try to negotiate with the chinese. >> that's why we're going to bounce i want people to understand i think the dye has been cast. >> kudlow comes back to work on

monday you don't think that makes a difference >> who can predict anything with this administration? >> well, i mean, it's kind of our job. >> all right. >> i think the navarro faction they think they're going to beat china. they think they're going to win. they're not saying it's going to go on forever. for all i know, it could be over faster than comcast and disney disney gave you a little faber report i think those buying stocks today betting wait a second. i think that's going to be misguided. if you want to buy stocks because you think they overly international stocks they overly discount the negatives, i think that's a start i buy that. >> instead you buy red hat >> no. i got them on tonight. >> wow. >> yeah. i was making calls redhat saying could it have been -- i like jim whitehurs

very much. the first interview he did when he came from delta was with requested m"mad money. it was a disappointing quarter one person i asked yesterday what is up with redhat is it the amazon web services? he said redhat is a company that beats and raises now when it doesn't beat and raise, we have to find out what it does. >> we had adobe. last night you tweeted a picture of nvidia, your dog. i think your words are "tomorrow is going to be no better." nvidia trades ridiculously with redhat everybody buying stocks should recognize redhat is stock specific they have an issue with amazon web services understand that stock is one of the cloud kings like adobe i liked adobe's quarter. like service now is absolutely nothing to do with redhat traded down immediately when the

quarter came out as the conference call went on, the stock went lower the analysts were saying oh, please, maybe this i have a softball. maybe could you -- no. but maybe you said high single digits we have 11 11. >> that's not high single digits >> jim, we got a limited window to check in with sully at opec let's do that. opec did reach a deal on an output increase and brian has been covering the meetings all week in vienna >> reporter: thank you very much i may have to sit downright away the press conference is about to get started here we're expecting an output increase it may not come in the form of a hard number. we may not get a number in the announcement 1 million barrels. it's probably going to be a percentage reduction in the reduction. they're operating under a output cut already. the opec nations plus the other

ten, called the 24 they're going to return to full compliance it means go back to the original cuts at 1.2 million barrels per day. you're probably going to get another 600,000 to 1 million barrels a day added to market. they won't say that. they're going to say we're going the reduce cuts by this much iran wants to stick by the original deal. that's probably the hard deal that saudi arabia and iran had to drive late into the night last night you can see, obviously, the market doesn't believe that whatever we get here today is going to be enough to keep prices down. so president trump may not be happy about that i'm going to sit down because i don't like get arrested. the press conference is about ready to start i'll send it back to you. >> always a little awkward live stand ups as the presser is

about to begin thank you, brian sullivan in vienna 2% move on crude interesting on a production hike. >> yeah. i think that don't forget we're close to the big saudi aramco deal you don't want oil to come down ahead of that. i didn't want to see this. i wanted to see oil down to 60 you have dollar going the wrong way. and you've got the wrong yield curve for the financials you need raw costs to come down. and the easiest way raw costs will come down west texas go down to 62 and they don't have that be careful what you wish for i'm saying that there are opportunities in this market but this was not the story that you wanted if you're buying stocks off of this, other than oil companies stocks, i think you're going to hear when we hear the conference call it was like wow we lost a dollar raw costs are higher. >> yeah. it's interesting your point about industrials is

curious. people are looking at cat today. just below 140 it's tested that level three times since the beginning of the year. >> right. >> it's been a win every time they got down there. >> again, i think there is a narrative being put out that there's going to be a last-ditch attempt to not have a true all out lets really hit china where we can that's causing these stocks to bounce i would rather have them if you buy cat you don't expect to read the things i think about china you'll have bad things and good things i think the president trump really his advisors believe we have china on the run. and why make truce truce is a loss, according to my sources. >> but it's not a one-front war. as europe demonstrated yesterday with harleys and bourbon and cranberries. >> we think we're going to win

everywhere. >> yeah. >> i'm just saying they're looking at their poll numbers. they're looking at the job numbers. they're looking at there's more jobs than people. >> sure. >> they're saying we're winning. and china is trying to prop up its economy and the germans need to make more cars here and we're winning. why shouldn't we take our foot off the pedal here why shouldn't we crush them. that's a big thesis within the white house. i think it's one that you got to bank n. >> yeah. they're sure banking on it. >> yeah. europe they're manufacturing pmi. the market pmi lowest since december of '16 today. and the commentary out of market is manufacturing, at least services did hit a two-month high but manufacturing is going to get tough for those guys >>well, like they need china

stronger they send a lot of stuff to china. >> yeah. the comment this week struck a tone. >> that was forecast i thought it was interesting because it was a political forecast they were saying things were so weak but again imagine that's the story they tell. oil is too high. dollar is too strong technology we have to be in the trade war with china micron's technology was being stolen by the chinese. the president reads those -- well, someone tells the president those stories. and they say, listen, we can't let up here. and then there's a bunch of stories about how they're going to let up. those stories, i think, are wrong. that's what i'm saying there's a lot of false reporting. >> so your guidance is for extension this sort of negative narrative. >> a bounce up off what i think

are bogus stories and the stocks come down. the stocks are getting cheap i genuinely believe we're going to win the trade war it needed to be done within the next three to six months. >> that was my next question. >> the world is slowing too quickly. if you don't end it within three to six months. my idea you can buy an industrial on weakness is going to prove it. i don't want to, obviously, the stocks are being valued incredibly. >> we have not yet seen a wave -- we did get an upgrade of united rental yesterday. >> i saw that. >> the concerns got slaught arouered yesterday. >> they are levered to oil and gas. much more than people thought initially. it's a great pure play infrastructure it's a great bargain to rent the stuff rather than own it i think the stock is incredibly cheap.

because people feel like the economy is slowing people are dumping it it's a better buy than cat. >> yeah. >> that's a better buy. >> we're going to get to the banks. obviously, ge there's some tesla news, as well. when we come back we'll talk chipotle the burrito chain testing new menu offerings we'll take another look. directv now gives you more for your thing. get all the good stuff about tv without all the bad stuff. yes! you can still stream your favorite shows... yes! ...with no annual contract. wait, what? it's live tv. yes! with no satellites. what? and no bulky hardware. no bulky hardware! isn't that great news? yes! noooooo! no! noooo.

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it's been quite a week for starbucks, of course, after the guidance on comps earlier. david's interview with johnson in boston. and now new information. >> i got an a poignant e-mail from howard schultz this morning. sent very early. i'm going to read it i thought it was somewhat -- it's not personal. it's about business and it's a different tone howard wrote me and said "given starbucks scale and global footprint, it's almost inevitable we'll face changes in

the business and others due to market forces. yet, if you look at our history, 26 years as a public company, we have been a learning organization that is built on a foundation of growth and innovation leading a superior financial performance. i can promise you this time will be no different. there has been a glitch in u.s. comp store sales and determine the glass is half empty, they are respectfully dead wrong with regard to china. and then i thought this was probably the most telling paragraph. the stock, which in almost 40 years i have rarely commented on is cheap and undervalued we'll build a great enduring company. this is absolutely right this last paragraph. i've known howard for years and years and years. he's never said to me our stock is cheap and undervalued he's told me what he's working on he never uses those terms.

>> i have a question on messaging, which is he's chairman of the company for another few days then he just becomes a large shareholder. >> yeah. >> and does he overshadow johnson even now with this kind of statement is that what you want? does it matter >> stock has dropped dramatically i think he has a good historical presence i know i'm meeting with kevin soon to try to get an even better -- i don't want to say clear the air. some people felt that the interview was more -- not that much of a free pasta you and -- pass that you and i got. >> he doesn't do that with great frequency. he hasn't said it before he hasn't? >> no. i remember when he came back after the problems and the stock was all the way down he said, you know, we're not doing that well.

>> the street proves it's true what he says it's not smart to bet against them they've never had 28,000 stores around the world they've never had more stores than mcdonalds in the united states. >> and face the competitive likes of j.a.b. >> yeah. look, let me back up i got it this morning and i thought it was curious and worth sharing with our viewers as o'pospposed to saying 2.6% ys it seems too high versus the rest of the group. i thought it was an important for those trying to figure out what to do with the stock and the stock has been shelved. >> right since the interview. >> i think it's important some people might say, listen, is howard -- one story line is definitely he's gone i mean, this is, you know, this is kevin's company now

another storyline might say, listen, i've been there since the begin and i hear a lot of people betting against us. he's not saying i'm betting against them i'm just a commentator but he's saying, listen, you know, china is going to be good. and we've had moments that have been -- you're looking at me like i'm from planet -- >> i'm trying to think through the implications if you're kevin johnson you encourage this it's another strong voice or whether it's getting in the way of your message. by the way, this is not necessarily central to what you're talking about here. >> you said kevin is not here. i thought it was important to point out that here is a guy from the beginning who is saying something highly unusual. >> that's a good question then everything you know and what you've heard from mr. schultz

and the 12% decline of the stock price and with our no-pass interview given to mr. johnson the other day. do you buy starbucks here? >> i don't particularly like this segment of the economy. >> you're not playing in this at all. >> no. i don't. and i think that the stock would be down regardless maybe not down this much but, you know, look to be bear dunkin' donuts has negative and that stock is on fire. >> somebody delivering alpha. >> yeah. it's alpha alpha. >> yeah. as we pointed out, typically that's been the better bet to go the other way. >> macy's they had the two for one split. got cut by 3/4 but what matters to me, i got it i wanted to pass it on to people do i say now is the chance to run in i say, listen, i wouldn't bet

against starbucks either they have a good team. good product there's my triple venti skim wet. >> do you wish they would get less political as a brand? >> in my twitter feed i keep hearing that i've never heard someone say i'm switching to dunkin' donuts because they're political. >> you have? >> yeah. look at this week. airlines on immigration. companies that can't avoid some of this stuff. >> yeah, you're right. i thought it needed to be share and people would love to know what howard's thinking is. david is right, too. is that is it howard's time to say that >> move on to other aspects of his life. >> we managed to beat the music. we killed it. >> they gave up. >> i wasn't talking about us moving on.

i was talking about howard. >> why don't we move on. when we come back, cue the music -- >> that's never happened before, ever jim cramer just took us to break. >> we'll get cramer's mad dash and count down to the opening bell another look at the premarket. back in a minute

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he's warnndering into weird territory. as larry kudlow said, with all due respect, you're completely wrong. no this is an important note. >> nagasaki. >> right he used a term it's a term of art. a term of endearment, or a term of law he says that tesla's gross margins could be over stated. >> in the automotive division. >> yes owe know overstated is a term that the fcc is not thrilled about. he's talking about struggling to find evidence why the cost of goods and maintenance have increased exponentially. basically saying that where the costs were, made it look like that maybe it was cheaper. >> overall margins don't change for what they're reporting but his point is everybody is focussed on automotive and what the margin is there. are they over stating that margin >> right

yes. >> by understating costs. >> now the upshot being burdensome that ought to be in automotive you know, should be in automotive saying the margins may be overstated david, if i were the fcc what i would do is call elon musk in. but elon could tweet that tony doesn't know what he's talking about and maybe the fcc will be hands off. >> right it would be he said/she said. >> i like tony. >> i know. >> it was just when he said apple's best times were behind them when the stock was at 93. i thought that was -- >> opening bell -- >> i'm going to tell you, david, we have to go. >> opening bell next

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3.5% actually had an eight-day loss during the crisis in which we fell 22% [ applause ] so a steady of number of days. [ opening bell ] the only stock in this that have held on microsoft, walmart but that was down a lot before and pfizer plus .22. there's a lot of destruction all the way around. >> opening bell here at the big board. rising ground a nonprofit helping new york city families with a variety of services and programs over at the nasdaq it's electric corps. celebrating the ipo. >> it's been a hot segment the best, by the way, in this period on monday is the one that is not involved in any sort of

take over. verizon. >> yeah. >> keeps coming back as being a favorite. >> you noticed the analysts community? suddenly it has to be at two or three major upgrades. >> it's incredible >> yeah. don't you find it interesting that they don't have anything cooking that's big except for five g and lowell mcadam. vestberg is replacing him as ceo. >> he said he's made it clear they're not focussed on what he calls linear asset and the analyst community seems to be rallying around verizon. some say it's cheap versus historical norms and the idea of 5g and doubling down on its own business at&t shares down 18.5% for the year. >> wow. >> verizon is down 7%. it had been down a lot more than

that at&t market cap, of course, has gone up a lot recently why? because the shares they actually gave to everybody in the time warner deal >>well, i just i find that verizon has become the beloved because it has no international. interest rates have gone down. they're not doing a deal that's a recipe of what people want. >> worst down day for the year remains ge 26% on the yield goldman is saying they should suspend dividend for 18 months in order to avoid an outright cut or downgrade. >> wow worried about a credit rate downgrade. tail risk associated they're talking about long-term care remember, they had $15 billion from ge capital there. >> it was a $20 billion total. >> right. >> and interesting note to tesla. if you think you're doing stuff,

ge never got in trouble and they had, perhaps, i call it ill advised. >> it's only what was it last october or november we learned about it it's not that long ago. >> remember the number jb said what the charge might be as much as in the november meeting in 2017 >> $3 billion. >> $3 billion. >> no, you're talking 2016. >> no 2017 november. >> no, no. last november -- >> yeah. different cfo. >> no, that was -- >> yeah. i'm saying that in november. >> in november they gave us the news. >> no january is when they gave us -- there was a lot of news. first the guide down and then the long-term care. >> right. >> and i think you're right. and the interesting analyst meeting. >> yes that we know about. >> where flannery basically said, you know, ugh. >> as we're talking the president is tweeting about

trade and immigration. 80% of mexico's exports come to the united states. that rely on us. they have strong immigration laws u.s. has pathetic and weak immigration laws that the democrats refuse to help fix we'll speak to mexico. he earlier this morning suggested that the gop should make no further attempts to pass immigration legislation. but that's a new wrinkle by the way, gm today says they will make the chevy blazer suv in mexico, despite the criticism from the white house >> i thought that was interesting. a lot of what i think happened when ford chose to abandon new plant in mexico, mercedes-benz and bmw went full bore with two huge plants which are now producing cars but yeah, i mean, i think

there's another line from another storyline from this period is that there is going to be it's going to blow up these are why the stocks go down. >> we've been talking about the possibility of consolidation and sort of generally speaking the food area for awhile i'm sure you saw that headline. >> right. >> conagra now in the past, as you know, conagra made it clear they would pursue price discipline and be disciplined in terms of any acquisition. let's look at pinnacle, by the way. the stock has took a plus percentage position back in

april. 9 9.4% in pinnacle and they have been pushing them for a potential deal they stopped that cooperation agreement. and they also had with conagra there's a look at pinnacle they're in active talks. where it ends up is unclear. they've tried it once before, as people may remember sometime back they are trying again. >> i met with sean conley a couple of weeks ago. they're the best performer the most important thing he's done, he's taken a lot of plastic out and put paper in

the millennial's love it. >> frozen is more healthy, anyway, compared to other areas. >> right i was in the frozen food aisle yesterday. >> were you? >> yes were i want more details. >> at king's. >> okay. >> looking at the labels i couldn't believe how many calorie was in the peas i was going to get i got fresh broccoli. >> frozen? >> no. fresh. >> you mean with the rubber band. >> yeah. i didn't buy the organic i just said it didn't look any different to me. >> you look good either way. >> thank you. >> i was checking out conagar prices not because i knew about the pinnacle deal. and frozen food is cheap okay it's really cheap. i bought a chicken for $18 last night! only to see that they may be selling the empire chicken

empire brand empire kosher brand. you probably have one of those turkey's for thanksgiving. >> who knows i don't get involved in that side of things i do dishes. >> have you ever bought anything >> i try to buy as few things as possible. >> they have aisles and like soap is not the same aisle as candy. you know, there's -- it's incredible, david. i walk down whole aisles with canned goods. >> wow. >> do you want to do banks quick? now there's confusion about whether or not -- >> goldman and morgan stanley. >> yeah. they came in lower than expected has to do with a 3%.1%. >> goldman was up 60% two years

ago. there was a big division yesterday was the preliminary. we see the results last week you tend to see huge buy backs i, for one, trust goldman. i rarely felt as idiotic and stupid as that than when i pay that $18 chicken i could have got one for $9. i think goldman is up because people don't understand goldman tries to figure out the right amount they don't want any excess capital. they don't have a buyback. that was why it was one of the worst performers i think goldman sachs next week is going to turn the jets on. >> you think the buy back? >> yes they need to resolve something with the fed, to a certain extent if they're deemed to have a 3.1% reserve capacity on the doomsday scenario, that's not enough. >> what did they put out independent reserve models we expect to discuss. >> i know. who is going to win that

argument >> this is not the first time they have played it close. >> okay. >> who is going to win that argument government tends to win, unless it's tesla >>well, resuming the buy back would suggest stock has reached a level. >> right. >> let's look at this. goldman stocks should be down big, if my thesis is correct. >> right it's trading with the rest of the group. >> say what you did again. >> you're right. [ laughter ] >> you wanted to hear it again. >> i had said you're and right in the same sentence it was the same sentence. >> and it was directed at you. you're the you're. >> and there was none of this. >> right quick, as we end this week, might as well check in on the battle for fox. >> go ahead. >> yeah. >> sometimes people don't know we have a show, apparently and they call. and i take the call because you guys don't -- >> i'm sorry.

>> not much to report here i mean, obviously, we're focussed on our parent company comcast and the expectations needs to be that comcast will come back with an offer to compete with, obviously, exceed would be the hope the $38 in cash and stock that disney offered. or not offered signed up a deal with we did get the amended proxy out indicating the things we told you in terms of a bit of a bump on the offerings they have for anti-trust review, if, in fact, they're pushed to vest certain assets but on the comcast side, timing wise, it's unclear at this point. there was a lot of expectations, perhaps, they try to move very quickly. i'm hearing this point that may not be the case. we don't have a record date. we don't have a new meeting date yet. they might not feel as much pressure to move as quickly as some thought they would in the comcast camp perhaps it'll be a week or more before we hear back from comcast. there's a slightest possibility

of highly unlikely it chooses to bow out. i said highly unlikely. >> why did you put out there >> i can't say it's a 0% chance. >> you're right. >> is it very small? yes. so the question then becomes what is the number going to? you know, the possibility, by the way, that maybe comcast would feel, in a sense, almost forced if they were to go to a high enough number to include some stock believed to be very much undervalued by management. >> right we'll keep a close eye on it it doesn't appear likely at this point based on what i'm hearing that comcast will come back. >> i just like the "wall street journal" article i know it's not as close -- you know more than i do. i thought it was an interesting piece. >> it was an interesting piece. >> on the relationship between murdoch and iger and brian roberts. >> yeah. it's one of the few nasdaq stocks up today.

a lot of stocks are going down with think with redhat including my dog. >> right. >> we'll get to bob. >> happy friday. first time in eight days positive on the down a couple of thicks that are helping the markets. number one, we've got decent manufacturing numbers. particularly over in europe and europe could use it. it's up about 1% overall some optimism over opec here raising production but not as much people thought. oil stocks are up 1 to 2%. the banks pass the stress test that's a modest positive there's stories floating around that maybe the white house restart trade talks. it's floating around out there i think it's a marginal positive you can see it in the markets. energy stocks are up 1% or so. they're up for the week overall. the banks rallied a little bit

here thestress test helping retail has been great, again, all week and semiconducts up there's been damage done to the tariff issues all week we talked about new lows in the big industrial names yesterday so industrials are down about 3% for the week materials are down 3%. semis. these are the tariff stories so a lot of damage being done here you talk about redhat under pressure but the dollar is the story you're going to see this a lot with companies reporting earnings eric sander given the head winds that have developed since that time, we're adjusting our full year total revenue guidance by approximately $50 million to account for the change in fx rates. oracle said this, as well. you're going to hear companies going into earnings season learning about the affects of rates. we haven't seen that for awhile. going to be one of the biggest volume days of the year. probably will be we have a yearly event it's called the russell reconstitution this is the triumph of the indexers, folks. we talked about etfs

this is day it matters here. the russell people will be rebalancing the russell 2,000, which is the big cap and the benchmark and the russell 1,000. the biggest stocks going to the 1,000. the smallest going to the 2,000. a lot of companies get moved around because they adjust their share waiting throughout the year we have about $9 million benchmarked to the russell indexes. that's a lot second only to the s&p 500 and about 10% of the russell 2,000 which is a benchmark controlled by index funds when you change the stocks, a lot of money moves around. this will happen in the final close. watch out for a couple of names out there. apple is reducing the share count waiting. grub hub is going from the small cap to the 1,000 it's more money benchmark to the 2,000 you might see stock for sale in grub hub i'll go over the names affected throughout date. big volume today now at the highest of the day, carl. >> bob, thank you. we'll get to the bond pits, as

well rick santelli at the cme good morning, rick >> reporter: good morning, carl. obviously, equities had an interesting run. softest in the dow and the nasdaq big issues there there's not a big issue in the fixed income space most treasury rates are close to unchanged on the week. there is a bit of a curve bias look at a one week of tens and if you pick 290 to be your support, and just under 3% to be your resistance, the month of june has been kind to you. let's look at tens minus twos. there's a year to date chart we're not on the flat lows going back to '07. but we're close as we hoover around 36 basis points you know, a lot of attention bait paid to italy and some lesser extent greece is the quiet little deal they made to extend, of course, the game plan, i think, in certain ways with regard to how the european union treats the greek economy

but you can see that when it gets crazy over there the inverse relationship pressures the higher quality bund yields down maybe less and less. maybe it's something to pay attention to remember the ecb and mario an drag gi can only do so much. with respect to the currencies, especially those with centra bank meetings currently. one week of the pound rebounded. it acted squeamish one week of euro versus the dollar, it's darn close to unchanged. it's a little bit on the week. but the month of june for the year row gives you all you need to know. it was knocked off the purse with mario in the long-term implications of policy i would look for less volatility in the dollar index and the euro and the several sessions to come back to you. >> all right, rick see you later on rick santelli. when we come back, chipotle testing a new menu we'll tell you about it.

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chipotle is tasting some new menu items the new items are limited to the restaurant chain's new york city test kitchen but are expected to eventually roll out nationwide the move comes months after brian nichol left taco bell to become chipotle's ceo. a lot of discussion last night about kitchen complexity, through-put. what changes here? >> brian nichol is, that's kind of -- he was unbelievable at his promotion. he had great promotions, by the way. i don't know if you ever -- they're all very funny genius but it was something that chipotle thought it got right and fell back on this man is a technologist who is also a marketer there are a lot of very positive notes out there. i felt that once we had gotten

to the 15, 18-month period where we forgot about whether there was something dirty or wrong it would start coming back. and it's been coming back. >> anybody who wants to offer more chocolate milk shakes to the world. >> shake shack has a good shake. >> brian nichol talked to us recently about some new flavors. here's what he said. >> definitely opportunities to bring in some new flavors as well, but i think one of the things that's great is we've got carnitas and chicken that people just absolutely crave. and i think there's ways for us to present them in, you know, formats that you'd expect chipotle to offer that currently we don't >> you'd long said it took 18 months for consumers to forget about food safety. >> and it's been going up ever since. all that was looking at what happened to taco bell with a terrible incident it had some of the other with jack in the box, terrible incident they had. and it lasted about the same

time of course they had to restart it some bad pictures. but i have to tell you, i think that this guy niccol is very smart. the old chipotle wasalways talking about how their burritos had more than 80 ingredients and chipotle's had one-tenth of that now you have a guy who is really industrial strength. but i've always felt taco bell under him was very tasty and those who didn't, it just -- they bought the organic broccoli we had chipotle yesterday. we have it all the time for "mad money. >> we have to go >> enough. why do we have to go what is so pressing? >> pay the bills, as we say. stop trading with jim is next.

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let's get to jim and stop trading. >> really great quarter, carmax. the tax reform, also great benefiter of employment. wow. this was a much, much better than expected quarter. i suspect it will continue to go higher and there's a good idea because it's been down so long it's probably not finished

can go maybe another six, seven points without a problem >> jim, tonight? >> we have redhat. that's the reason why you're seeing a lot of decline in the nasdaq we have entergy. a lot of people looking for yield plays. we're going to give you one. and then green thumb industries. yes, another pot play. i've been featuring all the ones because of canada approving it, and this one is a very legit, two very smart guys. professor friend of mine knows him and swears by their acumen and i -- people want these more than any stocks we've ever done since the show began >> i have no doubt about that. >> it's amazing. quite the play >> good weekend, jim, and good week ahead >> i'll miss you david, when you said i'm going to emboss everything with you're right said david faber that made my whole -- i could retire >> please don't do that.

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good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with morgan brennan and david faber. at the stock exchange. the nasdaq this time that is red on some negative news last night out of redhat. our road map begins with paranoid declusions. that's what chinese media says the u.s. is suffering from >> opec reaching a deal this morning. we'll take you live to that meeting in vienna. >> and new eats at chipotle. unveiling a new menu lineup. a look at the company's new strategy straight ahead. first up, the dow looking to avoid its first nine-day losing streak since the '70s as trade rhetoric does heat up. the china daily saying the u.s. is suffering from, quote, paranoid delusions joining us at post 9, pimco's

portfolio manager tony, along with credit suisse chief u.s. equity strategist jonathan good morning where do you think we are in this whole discussion? are we watching a white house that's doubling down and is trying to gauge how much pain we sustain versus our trade rivals? >> i think the big question you have to ask is, are we really going to go into a massive trade war? the answer is no in a year from now, are we going to still be focused on these issues if the answer is no, that means that any headwind to the market is going to be relieved and you're going to pull that back up so while, you know, we hate to -- we were uncomfortable with the stock, we're overemphasizing in terms of market event >> we've been saying rhetoric only for a while now but customs is going to start collecting tariffs on july 6th when does the rubber start to meet the road? >> let's put the numbers into reality. there are tariffs being put on $50 billion worth of goods

25%. what is that $12.5 billion impact how much will the global economy -- how much economic activity will there be in the globe this year? about $100 trillion. from a long-term perspective, the next few years $300 trillion of economic activity it's tiny. all that said, confidence does matter, and this could shake confidence but we believe the u.s. and china will avoid what's called the trap referring to sparta versus the athenian government. the rise of one power facing that of a ruling power in 12 of the last 16 times, in 500 years, has led to war. people worried about a trade war. we think seen through xi jinping, the president of china's eyes, he'll play the long guy and avoid conflict with the united states. as much as they're throwing words at each other, in the end, some degree of cooperation and containment of the issue >> foxconn came out and said it's not a trade war as much a tech war

you start looking at intellectual property theft which the administration is starting to put more focus on this week, does this become a bigger issue than trade deficits and working out the trade flows? >> well, in thinking about the tech sector, longer term there is some threat that the government might become more involved look at california there's a proposal now to look at privacy concerns that consumers have but we see no consensus in washington on the issue. at least now before the election so don't expect the tech sector to be threatened meaningfully in 2018 by the u.s. government. >> i think that we have this issue wrong. and i think that we're talking about what happens if these tariffs hurt us. and what happens if we go into a trade war. but what happens if the fact that the u.s. doesn't have access to chinese market and that opens up when we get greater access what happens if, as a result of that, other countries around the world are able to also gain greater access to chinese market and we end up with more free trade? what happens if -- if subsidies

of foreign products are sold into the u.s. get readjusted and that ends up being a positive for gloeshl trade. what happens if this intelle intellectiintellec intellectual property theft which we all know about. nobody wanted to fight the fight because it was too unpleasant. and we fight and the market hates it and we hate it but in a year from now we realize, and we hate to say this donald trump is probably right on all this stuff and we're better off and the market actually rallies on the back of it and we get productivity i think the whole debate is on what happens when the dow side happens as opposed to likelihood that we end up better off. >> the president may very well be right in terms of intellectual property. that point is well taken but what about the overall idea of reducing trade deficits when you are running such a large budget deficit in terms of your ability to do that a lot of economists push back and say, really, we need to do this it's actually what happens as a result of running these

structural deficits. >> in fact, one of the risks we see, and anyone should over the next five years, is a recession from overheating if the u.s. trade deficit falls, u.s. gdp will increase it's already running in the high twos it's felt that growth potential somewhere around two as long as growth is above potential, the jobless rate will be put under downward pressure and this will put upward pressure on inflation. to some extent we need this. and we also should be looking forward to decline in the amount of fiscal stimulus in 2020, which will probably reduce some of this risk of overheating. >> the surveys this week, we just got pmi and philly found earlier in the week, worst since the election new orders, lowest since september. input costs highest since september 2013 already stagflation being tossed around >> fiscal stimulus this year is stimulus $150 billion of additional spending was authorized for 2018 in march

the fiscal year ends in september. a very smart amount of time for u.s. agencies to spend the money and u.s. agencies know how to spend money. what monies they don't spend by december 30th they'll contract out to spend in 2019 where there's already about a four-time boost to gdp coming. don't worry too much about this. it's probably more sentiment driven but it is something to be thinking about think of the idea that confidence is the cheapest form of stimulus. something iterated by larry summers, the former u.s. treasury secretary it's very important to keep confidence strong. >> but i think the point that you are alluding to is, next year, the earnings growth will be a bit weaker. next year the benefit of the stimulus will be smaller and the reason the market is probably not pushing it further is not because it's a trade issue but because we realize is that the 19 eps, the 19 economic growth are going to be lower than they are today. if you look at the ism at 58 and change, i don't know what it's

going to be a year from now but it's going to be a lower number. and so i think what we have is an economy which is going to be rolling forward but less -- you know, less robustly than today and investors hate a positive trend with negative momentum and they hate that second derivative that's the challenge >> as you know, it could be a good thing to have some slowing given the degree to which the economy is growing over potential. it's not a bad thing because it will keep -- it will do some of the work for the fed >> we keep hearing that. trade war makes it easier on the fed. did you have one more? >> today we're seeing industrials and materials, for example, rally we've seen them come off a lot with all the trade war discussions. given all the comments you'veer made here on this panel is it a buying opportunity >> i'm a buyer in the market not sure i'd be buying industrial materials this moment but i think that -- well, if i'm buying anything, i'm buying tech which is really cheap. but i think the u.s. market compared to the rest of the

world in equity land looks super attractive and i think stocks broadly are going to be up >> guys, thanks. good to see you both, jonathan and tony meantime, he is set to depart the company next week but starbucks' executive chairman howard schultz offering up parting comments about the company's performance to jim cramer this morning. in an e-mail, schultz says for those who have looked at starbucks when there's been a glitch and u.s. comp store sales and determined the glass is half empty, they are respectfully dead wrong with regard to china, it's going to be bigger and more robust than the u.s. ever was full stop. the stock which in almost 40 years i've rarely commented on is cheap and undervalued the leadership team will lead us to the promised land we've built a great and enduring company. as my mother was so fond of saying, this, too, shall pass. >> stock down about 12% since the company lowered its same-store sales guidance for the third quarter, fiscal -- of this year to 1% from what had

been a 3%. but still maintaining overall guidance we had kevin johnson on. we had a long, interesting conversation with him the other day. stock reacted in that way interest,ing 37.8 million shares is what mr. schultz owns but let's not forget he becomes just another shareholder in a few days. it is kind of interesting to hear this from just another -- large shareholder but atypical for a large shareholder to come out and say something like this. >> maybe that's why he's commenting on the stock when he rarely has before. >> he has a few more days left as the company's chairman. >> when we come back from rhetoric to real action, china's state media says the united states is suffering from paranoid delusions as tariffs get ready to go into effect. what a trade war means for transports the executive director of the second largest port in the u.s. is going to weigh in awon the street" will be right back don't go away. and packages.

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tweet from the president a moment ago i hope opec will increase output substanti substantially. need to keep prices down certainly not the case today with wti up almost 3% in part because of the production hike not quite as large as some expected there will be some constraints on production as well. but, obviously, the president using the bully pulpit to try to influence opec and the saudis.

china's state media slamming the u.s. saying the u.s. is suffering from paranoid delusions when it comes to trade. kayla tausche joins us with the latest >> neither side is backing down or making much sign of further communication. sources say that china's vice president wang qishan had been discussing a visit in july to continue the trade negotiations but in the wake of the president's threats over the last week there's been no progress on that trip. and talks are fadesing of it even happening but a senior administration official does say the zte deal is moving forward with the chinese telecom company making a $1 billion payment to the u.s. government, and that payment, i'm told, has cleared this week. but as talks with china drag, retaliation is coming back into view remember there was this truce with china where they were going to hold off on retaliation for steel and aluminum tariffs but

that ended in the last week so tariffs are coming back on fruits, nut and wine then retaliation from canada coming into play on july 1st and tariffs from europe beginning today. the eu will begin charging 25% on bourbon, peanut butter, orange juice, motorcycles and playing cards. the total is just $3.2 billion in u.s. exports but it comes from politically sensitive states kentucky, wisconsin, and florida. the eu commissioner for trade said this week, we did not want to be in this position, however, the unilateral and unjustified decision of the u.s. to impose steel and aluminum tariffs on the eu means we are left with no other choice needless to say, if the u.s. removes its tariffs, our measures will also be removed. people within the white house are talking about the fact that there hasn't really been a breakdown in polling on the president's economic policies. there still seems to be support for what he is doing and patience to see whether those results come in, although the

next few weeks could be crucial as some of this retaliation comes into effect and could affect local economies on the ground guys, back to you. >> kayla, when i see items like sinks and playing cards, we talk about the impablct all of this could have on u.s. consumers it's going to impact consumers in all these other countries as well >> it will for people that want to buy bicycle playing cards manufactured in kentucky, if they want to buy them in europe, that's going to be an additional 10%. think about kohler sinks coming from wisconsin, the home state of house speaker paul ryan stainless steel sinks and wash basins those are going to cost 25% more if they pass those costs on to the consumer over in europe. so there could very well be effects on both sides of the atlantic here. >> kayla, thanks story continues to evolve day by day. kayla tausche in washington.

when we come back, opec reaching that output deal this morning. we'll take you live to vienna. hear from the former exxon arabian gulf president market close to session high dow up 182

we're watching tesla today after bernstein's analyst puts out a note saying the gross margins of the company may be overstated phil lebeau joins us with more on this note making the rounds today. >> i'm looking at the note from tony saganagi. gross margins is an important metric because the company said we'll be over 20%. but in a note put out this morning, he says i'm having trouble squaring the numbers with what i've seen. he says tesla services margins are plummeting does this mean auto motive gross margins could be overstated? here's what he's talking about the services margin, take a look in the third quarter of 2016 it was plus 5% in the first quarter of this year, it was negative 45%. part of that is because of an increase in the cost of goods

and services within that services division. and again, auto motive gross margins is what so many people, investors in particular are focused on for tesla's automotive gross margins, 18.8% in the first quarter. the estimate from tony for the second quarter of margins roughly 15% when it comes to auto motive gross margin and the target set by the company time and again over 20% ultimately elon musk believes the target will be somewhere between 20% and 30%. so this note is going to get some attention from investors, and that's the reason why you see shares of tesla under some pressure this morning. >> now, phil, he's not questioning the overall margin structure at tesla, right? it's just a matter of what silo some of these costs of goods n services are going into in. >> correct and the question is, should some of the automotive gross margin impact is it being shifted over into the services division if that's the case, that might explain why you see the drop in

the auto -- in the services margin while the automotive growth remain at 15%, 18%. >> phil, we'll watch tesla phil lebeau watching that. scotus decision on whether or not police need to get a warrant to get location information from cell phone tower sites. eamon javers outside the court again. >> it's written by chief justice roberts and looks like they're siding with timothy carpenter, the petitioner who is working in this case against the united states government. this was a case where carpenter was involved in analleged robbery. the united states government prosecutors were able to get cell phone records based on going to the cell phone company. and the question is whether that violates the forth amendment to do it without the warrant. it appears in going through this case very quickly that the government here, the supreme court here, is siding with carpenter here they're saying we decline to grant the state unrestricted

access in light of the deeply revealing nature of that its depth, breadth and inescapab inescapable. the fact it's gathered by a third party does not make it any less deserving of fourth amendment protection it was a search under that amendment. they're reversing a judgment of the court of appeals here and remanding the case, carl a win here for the fourth amendment. purists who say that cell phone data should be protected by the fourth amendment, even if it's being held by the wireless carrier off site and they don't need a warrant to search the individual or his possessions, carl >> once again, a decision that pivots around how technology is evolving and affecting all of our lives. eamon, thanks for that john, it's not so much about technology and taxes but the

ability of the fourth amendment to protect us from technology in some cases >> that's right, carl. i think this is the very definition of how the court adapts to the modern world and you know, we -- people have talked about on both the left and the right the high stakes in government -- in control of the supreme court. the failure of president obama to get a supreme court vacancy and then gorsuch was appointed and approved by republicans. but nevertheless, a conservative dominated supreme court yesterday affirmed the right of states to tax online purchases and today they affirmed the rights of a defendant in a criminal case to the expectation of privacy and the fact that his telephone records would not be subject to search and seizure without a warrant. i think it's very revealing of

the way courts adapt to the times, whether or not they're governed by a liberal majority or conservative majority it would be interesting to see what the dissents are, 5-4 vote, but it's a fascinating adaptation to the 21st century >> john, one of the things that the courts had been arguing in this case when it was brought in front of the supreme court was this idea that the reasoning that cell phone users know their providers, determine their location to do things like connect calls and that for that reason they wouldn't need a warrant. and what's implied in this is the fact that maybe consumers and users of cellphones don't know or understand how their data is being used >> that's right. and we've seen this issue of data privacy come up over and over and over again from the government's ability to -- that we saw discussed in the snowden matter to obtain without

warrants the medi data from telephone conversations and we've seen it now with respect to facebook and what they've done with your data. there was a time in the late 1990s when privacy was a rising issue. then after 9/11, people were so concerned about security that those issues -- those fears receded. well, they're coming up again and the supreme court is affirming them today >> by the way, kennedy does write the dissent joined by thomas and alito we'll try to get through that as well thanks, john did want to bring everybody up to date on the latest from president trump and a tweet related to the ongoing trade dispute with the eu. you heard from kayla tausche earlier about those tariffs going into place on certain goods being imported into the eu this is important because of, look down here, the threat that the president now has about a

20% tariff that will be placed on all of their cars coming into the u.s. that being the eu. and this, of course, as you might imagine, something that will focus their concentration there given the importance, certainly of the largest economy in europe being germany and how many cars are imported from that country into the united states so again, based on the tariffs and trade barriers long placed in the u.s. and great companies and workers by the european union, these tariffs and barriers are not soon broken down or removed, the president threatening a 20% tariff on all automobiles from the eu into the u.s. you heard the list of said products that we were just talking to kayla about that are now subject to tariff in the eu. but this would up the ante dramatically >> absolutely. and we know that folks in the eu have been worried about it we also know from phil's reporting earlier this week that many of these german automakers actually already have manufacturing for some of their models here in the u.s and some of them have even been

expanding in recent years. >> without a doubt and responsible for hundreds of thousands of jobs. it gives you an interesting point of potential leveragethe may have but certainly given the export economy that is germany and how important the automobile is there, not so much to france, by the way, but certainly germany, you'd imagine this is going to get their attention. and it's been a concern. >> cramer's point this morning was that white house believes we can sustain pain better than some of our trade rivals dow is down a little bit not by much. >> interesting, of course, saying they are our rivals because that's the point the eu, of course, our longtime allies and that's part of the current play, i guess, is just what a dramatic about-face we're taking with them >> we'll see how this -- more will be revealed now for our etf spotlight, dom chu is back at hq looking at financials with big banks passing the first round of the annual stress test

>> 35 checkmarks all of them passing that particular mark. we're seeing a little of the activity on the up side for those financials today as you can see here with the s&p 500 financials so far today, we're up about 0.3%. and we have been hovering somewhat in a range so far as you look at the overall sector picture, financials are among maybe just in line some of the laggards here. if you take a look at the year to date chart on some of the etfs that have tracked this particular market, we put up the s&p 500 etf, the spdr, year to date ticker xlf, and one that tracks the regional banks, kre. you can see here that those regional banks have really outperformed not just the financial sector overall but the market as well so something to keep an eye on as for today's trade with regard to those etfs and what's driving them, there are certain stocks we're focussing on today let's look at some of those in this particular element because we're seeing intraday moves in

the big ones jpmorgan chase, bank of america, goldman sachs, morgan stanley. all four of these moving to the up side so far today they are driving some of that action a pick-up in volume for some of these etfs, carl whether or not it stays that way remains to be seen but those stress tests, at least perhaps providing a little bit of a positive catalyst in today's trade. back to you. >> they sure have needed it. thank you dom. a news update with contessa brewer at hq >> here's your cnbc news update right now. in a tweet this morning, president trump told republicans to stop wasting their time on immigration until after the november elections he says democrats have no intention of supplying the votes necessary to pass legislation on the issue and that they can pass legislation after the red wave, capitalized. russian president putin welcoming south korean president moon during a state visit intended to boost bilateral economic ties. putin greeted moon at an

elaborate kremlin ceremony before they sat down for talks he vowed to try to help settle tensions on the korean peninsula. prince charles and camilla are visiting salisbury which is still recovering from the poisoning of a former spy and his daughter in march. the visit was designed to support the local economy. delta airlines has revised its animal policy again. it's limiting emotional support animals to one per customer and banning pit bull type as either comfort or service type animals. interesting what the response is to that from customers changes go into effect on the 10th when we come back, we'll take you live to vienna on the heels of the opec deal we'll continue to watch the fallout of the president's threat to place a 20% tariff on all european union cars coming into this country. dow is up 125. we're back after a short break i'm april kennedy and i'm an arborist

with pg&e in the sierras. since the onset of the drought, more than 129 million trees have died in california. pg&e prunes and removes over a million trees every year to ensure that hazardous trees can't impact power lines. and since the onset of the drought we've doubled our efforts. i grew up in the forests out in this area and honestly it's heartbreaking to see all these trees dying. what guides me is ensuring that the public is going to be safer and that these forests can be sustained and enjoyed by the community in the future.

deal on oil production brian sullivan is there. he's got a guest as well brain, take it away. >> thank you very much listen, the president chiming in on the opec bandwagon a few minutes ago. president trump tweeting out, hope opec raises output substantially. need to keep prices lower. guess what opec basically did increase output but yet prices did not go lower. prices right now are higher. let's bring in clay siegel, managing director for oil at genscape we effectively got an increase in oil output. by all accounts somewhere between 600,000 and 1 million barrels per day. why is oil higher? >> let's talk about what they decided here it seems they decided to go back to what they already agreed to which would amount to an increase of about a little less than 1 million barrels a day

the problem, though is not all of the member countries can step up their production. so in a situation like this, the countries that have spare production capacity, saudi arabia, united arab emirates, have the opportunity to gain some market share. those guys with reduced capacity to produce -- iran, venezuela -- are at risk of losing market share. >> the market is obviously disappointed, clay >> traders are smart not only looking at a production increase but a reduction in spare capacity as production goes up, that cushion, that insurance of spare capacity gets future supply disruptions shrinks. you carry a spare tire in your trunk, right i've never seen anyone who carries two. once you strap that on and keep driving, be careful. >> are you surprised by today's decision >> not at all. it was clear going into the meeting there was some disunity in the group hard for each one of the member countries to come up with an assignment this is the cop promise they've come up with >> you cannot overstate there are 240 members of the media in

that room. more than a presidential press conference oil is global. and so many hot spots being reflected now. iran, russia, saudi arabia, the venezuelan disaster, u.s. oil boom all reflected under the sheen of oil. what do you think are some of the big story lines besides the number of barrels being added per day to talk about? >> there are a lot of elephants in the room. you have sanctions may be looming coming back on iran in august you have actual oil infrastructure being sabtauotagd and destroyed in libya and the elephant not in the room in opec which is the united states e & p industry. i think opec learned a lesson from that. >> clay siegel, thank you very much it really is truly amazing when you look at the global politics that are at play they'll come out and make some decision about the number of barrels but basically you've got all these different things at work it really is kind of something

interesting to watch it's a three-dimensional chess board. >> yeah. it is. brian, thank you, for all your reporting this morning brian sullivan from the opeced me ing meeting in vienna. >> joining us, jerry, give me your reaction to the news you just heard brian sharing >> well, that's great. thank you for having me on his comments were very appropriate. i never expected an increase actually in the production if any, a small amount considering the amount of oil that is produced around the world, this is kind of a blip on the radar. it's really from the a big effect and the points were made correctly that because of the turmoil everywhere, now i've worked in places like libya and the united arab emirates i know the gulf. i know the region. these -- there's so many

volatile areas and things happening like in libya now within the iranian situation so all of these things have an impact on taking oil out the venezuelan problem so even though they -- there is an increase being shown, it's really not a major increase. it's a backfill for a lot of the things going on. so it was not unexpected, in my opinion. >> yeah. so again, to your point. a blip on the radar. prices aren't even backing up at all, which you might have expected in fact, they're going the other way. where are you in terms of the expectations for oil from here is that an appropriate response today, and do we hang around this level >> i'm not surprised at that at all. the price of oil is in a good range right now in the mid to high 60s i really have expected us to be up in the mid-70s, which is a more comfortable range for the

opec countries particularly because of their budget responses and needs. so they do not want the price to go down any further. that is not good for their own budgets. on the other hand, they don't want it to go too far on the up side because they, again, that loses customers. it stifles the economy look, we're in a global world now and we all use that word and oil is the one thing that transcends all kinds of boundaries we don't want to upset that balance, and neither does opec i think they are astute businessmen when it comes to that so i'm not surprised to see oil go up a little bit consumption is up. so we will probably stay, i believe, in this type of a range. >> jerry, certainly when you look at the saudis specifically, i'm sure they don't want to see the price go down when they've got billions of dollars in infrastructure projects and hundreds of billions of dollars in arms deals they're looking to get done here with the u.s so many broader implications

i have a policy question for you. given the fact the u.s. is producing record amounts of oil and has become such a dominant player on the world stage, exporting more, do you foresee a time in which it's asked to come to the table for these types of meetings with opec and russia in the future >> well, i think that the opec effort and their participation has not diminished any in fact, it's a very powerful group that still controls so much about the price even though the u.s. now is on a par with saudi arabia and russia in terms of production, but still we are not at the point because we're a free market type of country and who produces oil and doesn't. and so our people produce oil as long as it's profitable. my company now petrotech energy, we do it for under $30 a barrel. as long as we make money, we will do it so will other producers. but saudi arabia and many of the opec countries, that is their

prime source of income so they have to be very delicate about what they do, about lowering prices or raising prices, and they have a deficit influence. anybody who doesn't believe that or understand that, surely doesn't understand the oil markets. i've been around long enough i remember the oil embargo i lived through that in the '70s it shows you how powerful it can be so a change one way or another really affects everybody >> yeah. jerry, we appreciate your joining us to provide some of those insights and history as well thank you. >> any time. thank you. when we come back -- shipping ports bracing for the impact of a potential trade war as the president threatens some new tariffs on imported autos. dow is up 123. led by exxon and chevron back in a moment

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♪ ♪ the president tweets about possible tariffs targeting autos from the eu. stocks are moving right now. let's bring in phil lebeau to synthesize some of this. >> carl, let's take first a look at the tweet from president trump in terms of the threatened increase in tariffs on european-built autos he says built on the tariffs and trade barriers long placed on the u.s. and its great companies and workers by the european union, if these tariffs and barriers are not soon broken down and removed, we will be placing a 20% tariff on all their cars coming into the u.s build them here. for some perspective right now, all european-built autos sold in the u.s. have a 2.5% tariff. while anything going over to europe has a 10% tariff from the united states. this is how much it would impact

sales. if you look there to the right, european sales, these are european-built vehicles sold in the united states, about 6.7% of the market last year works out to about 1.15 million vehicles guys, we've reported just a couple days ago that the german auto executives have been pressing their government, their ambassador in germany to basically extend a proposal to eliminate tariffs altogether in exchange for the president not slapping a 20% or 25% tariff on german-built vehicles sold here in the united states and the reason why germany has a $23 billion trade surplus when it comes to autos here in the u.s. this is crucial for the german automakers to have strong sales of their sedans. high-dollar, high-profit sedans here in the u.s. >> although, phil, it's hard to imagine france goes along because they don't really import

any cars -- export any cars to the u.s. market. also there is a 25% tariff we have on suvs and light trucks that come from over there, right? >> that's the chicken tax. they cannot send over -- not suvs pickup trucks. >> sorry >> that's what they cannot bring over because it's a 25% tariff and nobody wants to even try to match that >> so that stays, even if the rest of these were worked out, would that stay? >> would the chicken tax stick >> yeah. >> that's not going away that's been in place since the '60s there's not a chance they'll remove that. i would be stunned if they even thought about removing that. >> all right phil, thank you. phil lebeau out in chicago joining us to discuss the impact of trade turmoil on shipping ports is port of long beach executive director mario cordero. thanks for joining us today. >> good morning. >> so we're talking about the potential for auto tariffs on

european cars and vehicles now given this tweet from president trump just a short while ago but in general, looking at this escalating tit-for-tat tariff situation with china the fact the eu is putting retaliatory tariffs on some eu goods just today some are expected from canada next week. has that had any impact on trade flows at the port of long beach, which is one of the biggest in the country? >> well, at the port of long beach, the trade pool has been very vibrant 2017, he wee had our highest growth in container movement that growth continues at the tune of 14% year to year so there has been so significant impact on the port of long beach which, as you are aware, we're at the complex, the nation's largest port complex and most of our trade that happens here imports that come in are, in fact, from china. >> have you actually seen an increase in activity,

particularly where stuff moving in and out of the port to and from china and the asia region, have you seen an increase in anticipation of more tariffs >> well, we have definitely seen an increase in cargo and for a couple reasons primarily the consumer demand. and as you know, the domestic economy is very vibrant, as well as the global economy. and there's a component that there may be an increase because of, again, the expectations of the applicable tariffs >> port of long beach has been around for more than a century i would imagine you've seen trade wars and tariff disputes play out before. how would you expect this to go? >> well, i think history will tell you that at some point, there will be a balanced discussion where the parties in this case, china and the united states, come to a meeting of the minds. i think the trade will continue our forecast for the coming years is again a very expanding movement of cargo. so i think at the end of the

day, while there's certainly a discussion at the higher level regarding some issues that are legitimate, i think trade will move forward and again, ultimately, if this continues, ultimately, the consumer will be paying higher prices but in in terms of the amount of cargo we're going to be seeing in our biggest trade partner for the united states and china, i don't think that's going to change. >> of course, we'll be keeping an eye on those volume numbers coming in and out of your port as the year progresses and we get into peak container season mario cordero, thank you for joining us and giving us that key vantage point from the port of long beach. >> thank you, morgan let's send it over to jon fortt for a look at what's coming up on "squawk alley." jon? >> this brand new supreme court decision about what wireless carriers can and can't do about your location and how police need a warrant if they're going to get that real-time data

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rick, good morning. >> good morning, and thank you i would like to welcome dr. charles blahaus, former council deputy director. doctor, thank you for joining me this morning. >> thanks for having me. >> you know, the third rail of politics, social security, the trust fund's disability and retirement they're supposedly in trouble, we heard this off and on i want a couple of basic issues resolved is it true that the medicare trust has only eight months of actual reserve reserves, a? and, b, end years where we'll run out of mony and have to dip into reserves. is there any reserves? i was under the impression was a pile of i owe yous. >> you're correct that the medical hospital insurance trust fund has only about eight months worth of benefits in it. obviously, most of the funds coming into medicare come from

incoming payroll taxes so it's going to take about eight years under current projections for that hospital insurance fund to be depleted but that's a short period of time not quite as short as eight months but quite short as for social security, you're correct that in a sense the trust fund is holding i owe yous one way or another, taxpayers have to foot the bill for social security benefits through payroll taxes or general taxes to redeem the i owe yous it's very important in social security without a positive balance in that trust fund, social security cannot send out the benefit checks and right now very substantial measures would be needed to align the program's incoming revenue and outgoing expenditures to enable that trust fund to stay positive. >> doctor, i've read various articles preparing for this interview, and basically it seems to me the common thread is if we don't do anything, there's

going to come in a time in six to seven years, maybe eight, where social security benefits would have to be cut about 20% across the board is that true >> i actually think it's worse than that. i think it's much worse than that because the size of the shortfall in social security is already so large and this year it's starting to draw down those trust fund balances several years ahead of schedule we are getting to the point that the changes you would have to make to keep the system in balance are so great that if you wait six or seven years you'll not be able to make them so the window of opportunity for balancing social security finances is actually in the process of closing now. >> all right doctor, my final question -- and i'm sure that this one is going to be more difficult to answer is some of this deterioration been from the affordable care act, either before this administration or changes to it

after? has that made a big difference in the viability, especially on medicare >> well, it's a little different in the two programs. the effective legislation is a little larger on the medicare side than it is on the social security side. but honestly most of the deterioration has nothing to do with recent legislation. it has to do with payroll tax revenues coming in at lower levels. >> we're on a hard break but you did a great job in a short period of time i thank you. >> thank you. >> morgan, back to you. when we come back, more on the supreme court's decision to crack down on vemegornnt cell phone snooping "squawk alley" coming up next. welcome to holiday inn! thank you! ♪ ♪ wait, i have something for you!

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